Germany: 11/12/19 IZA - Institute of Labor Economics

Updated: Feb 7, 2020

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After a short walk along the Rhine River our delegation walked up the historic steps to the IZA - Institute of Labor Economics for a presentation from notable economist Dr. Werner Eichhorst.

Dr. Eichhorst provided an overview of the German economic landscape highlighting the relative strength of the overall economy compared to other countries in Europe and around the world. He noted three conditions he believes contributes to this: concessions in organized labor negotiations; the "hearts reform" that revised the unemployment insurance compensation (or re-numeration) to emphasis employment; and the overall training system. Unlike the overall rosy picture we received from the German ministry, Dr. Eichhorst shared several contrasting opinions or trends about the vocational education system in Germany. He strongly agreed that the labor market benefits from strong training programs, namely youth employment, which is among the lowest in Europe and the world. He did share, however, that like the U.S. college and university are increasingly becoming the preferred option for training, reducing the overall participation in the VET apprenticeship system. He shared that previously around 2/3 of the population participated in at VET program, and now it is closer to half.

He spoke briefly about the impact of the new minimum wage requirements for

apprenticeship, describing it namely as a response to the need to develop "good jobs" in Germany, and as a government response to the significant growth in low wage work. He shared that the data shows little to no impact on hiring and adoption of a minimum wage. One issue the apprenticeship system has struggled with is the lack of applicants to occupations with poor wage trajectories. The minimum wage may increase interest and retention of young adults in these pathways.

Dr. Eichhorst also noted that although there is often interest in return on investment for job training, that is not what inspires companies to engage in job training. Often is related to the cultural norms of the sector/industry or country.

Finally, he shared that the systems of vocational training and university are moving closer together, out of necessity. Companies, like in the U.S. are starting to prefer university graduates over vocational credentials -- attributed to the worldwide phenomenon of credential creep and parental guidance towards college. Additionally, as we move toward automation, the ability to create a "permeable" system that allows for constant upskilling will be critical to economic competitiveness for many workers.

Melinda Mack had the opportunity to briefly interview Dr. Werner Eichhorst for NYATEP on the Road, check out the podcast! The IZA - Institute for Labor Economics also provides a wealth of research that can accessed for free (including academic papers) and analysis that can be used in workforce professionals day-to-day work.

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